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TRID pushes Wells Fargo out of home equity loans

Right as nonbanks jump in

Wells Fargo (WFC) stopped offering closed-end home equity loans in light of the upcoming TILA-RESPA Integrated Disclosure Rule taking effect on Oct. 3.  

“Because closed-end loans were a small percentage of our overall home equity volume, we chose to focus on our line-of-credit offering and not to expend the resources required to retool our closed-end home equity disclosures to meet the new TRID regulations,” said Kelly Kockos, SVP, Home Equity Product Manager, Wells Fargo.

Instead, Wells Fargo decided to invest in other resources and made improvements to its home equity (non-TRID) line of credit product.

The enhanced HELOC product features:

  • A lower line limit with a new minimum of $10,000 for all states. (NC is the exception at $12,000)
  • Annual and account lifetime interest rate caps
  • Principal reducing payments that help rebuild equity

Additionally, the HELOC product includes an option to lock the interest rate on all or a portion of the available line into a fixed-rate advance and convert it back again as needed.

Bankrate explains that there are two types of home equity loans: term, or closed-end loans, and lines of credit.

A home equity loan comes in one-time lump sum that is paid off over a set amount of time, with a fixed interest rate and the same payments each month.

On the other hand, a HELOC is more comparable to a credit card.

Consumers can borrow up to a certain amount for the life of the loan, and during that time, they can withdraw money as they need it. As the principal is paid off, the credit revolves and can be used it again.

Meanwhile, right as Wells Fargo decides to exit the home equity loan business, loanDepot is excited to announce its venture into it.

On Monday, loanDepot announced its plans to offer new home equity products, once again making waves in the industry after breaking the news that it was moving into personal loans earlier this year.  

"Our vision is to deliver a diversified lending model sustainable in all market conditions. We look forward to leading the development of marketplace lending through the introduction of new products and services that provide credit solutions for borrowers with attractive returns for investors," said Anthony Hsieh, CEO and chairman of loanDepot.

(H/T: Bankrate)

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